Market Update

Tariffs, Turbulence & Staying the Course

Markets have seen significant movement in response to the recent announcement of new US tariffs, which are expected to impact global trade. While the tariffs themselves are a key focus, the way they were introduced has raised questions about the administration’s strategy and approach.

What Happened?

Ahead of April 2, called ‘Liberation Day’ by President Donald Trump, markets were already prepared for pain from increased tariffs. What they weren’t ready for was Trump’s dramatic policy shift. Instead of targeted tariffs aimed at specific countries, Trump introduced blanket tariffs on nearly all trade, with:

A 10% tariff on all imports
Significant increases on countries with a trade surplus with the US, such as China

Immediate Market Reactions

The consequences were swift:

S&P 500 dropped by more than 10% in two days (a rare event only seen during major market crashes such as 2020’s COVID fall, the Global Financial Crisis, and Black Monday 1987).
Asian markets also took a hit, with the FTSE 100 down 5%.

These tariff hikes, which could raise between $600 billion to $700 billion annually (roughly 2% of the US GDP), are among the largest tax increases in history.

Why Are These Tariffs Problematic?

The tariffs are controversial due to their wide-ranging and unrefined approach:

The reasoning behind these tariffs is seen as flawed, as they target trade imbalances rather than addressing unfair trade practices.
The tariffs ignore US services exports and the complex international supply chains that benefit both the US and its trade partners.

Global Economic Impact: What’s Next?

While the tariffs have shaken the markets, financial analysts remain cautiously optimistic:

Recession is not imminent, though the US economy may slow down, with GDP growth potentially reduced by 1-1.5%.
Europe and China’s government spending plans are expected to counterbalance the economic impact.
The inflation rate is higher than target, but still manageable, and central banks have room to reduce interest rates if needed.

Political Fallout: What Could Happen?

Trump’s decision-making could face political challenges, with Republican lawmakers criticizing the tariffs. Some suggest that Trump may reverse course if the market drops continue.
Legal challenges could arise, as only Congress has the power to levy taxes. Trump’s unilateral tariff increases may face a court challenge under the US constitution.

Stay Informed: The Situation Is Evolving

This remains a fluid situation, and while the full economic impact of these tariffs is yet to be seen, global markets are on edge. We’ll continue monitoring developments closely.